The taxman has been told that it must push harder in its efforts to collar tax evaders responsible for a £1bn black hole.
In its 'Tackling The Hidden Economy report, NAO chiefs said that more pressure should be brought on 'ghosts', individuals who fail to pay any tax, and 'moonlighters' who only declare some of their income , contributing to a sizeable shortfall in the public coffers.
In the report, NAO chief Tim Burr said: 'HM Revenue & Customs has experimented with new ways of encouraging people into the formal economy and it is managing to detect more unpaid tax.
'It could make better use of penalties and secure greater publicity for prosecutions to discourage people from operating in the hidden economy. With well over £1bn in unpaid tax each year, it is important that the Department becomes more effective in tackling the problem.'
The hidden economy is usually taken to mean any undeclared economic activity. Definitions vary, but it can range from casual moonlighting, work paid cash in hand, fraudulently claiming welfare benefits, through to tax evasion and organised crime, the NAO said.
For its overall performance, the audit watchdog gave the taxman a favourable assesment, praising the body for its offshore disclosure drive. 'Today’s report found that [HMRC] compares well in many areas with other tax authorities, said the NAO.
'The department has also encouraged people to come forward voluntarily to pay tax owed using its offshore disclosure arrangements, making use of information obtained on around 400,000 overseas bank accounts held by UK residents. Around 45,000 people came forward in 2007, bringing in £400m in additional tax at a cost of £6m.'
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